Alchar Hardware Co., Inc., In re

• Decision Date: 12 July 1985
• Docket Number: No. 84-5744,84-5744
• Citation: 764 F.2d 1530
• Parties: In re ALCHAR HARDWARE CO., INC. and Knight & Wall Co., Inc., Debtors. Jeanette TAVORMINA, Trustee, Plaintiff-Appellant, v. FIR, INC., Lawrence Lyman and Elias J. Hakim, Jr., Defendants-Appellees. Non-Argument Calendar.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1530

764 F.2d 1530

In re ALCHAR HARDWARE CO., INC. and Knight & Wall Co., Inc.,

Debtors.

Jeanette TAVORMINA, Trustee, Plaintiff-Appellant, v. FIR, INC., Lawrence Lyman and Elias J. Hakim, Jr.,

Defendants-Appellees.

No. 84-5744

Non-Argument Calendar.

United States Court of Appeals,

Eleventh Circuit.

July 12, 1985.

Arthur S. Weitzner, Miami, Fla., Barnett & Kress, Robert P. Barnett, Coral Gables, Fla., for plaintiff-appellant.

W. Van Sharman, St. Petersburg, Fla., V.J. Voorheis, Ft. Lauderdale, Fla., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before VANCE, HENDERSON and CLARK, Circuit Judges.

PER CURIAM:

Jeanette Tavormina, as the trustee for the Alchar Hardware Company, Inc. (Alchar) and the Knight & Wall Company, Inc. (Knight), appeals from an order of the United States District Court for the Southern District of Florida affirming a decision by the bankruptcy court dismissing a variety of claims arising out of the alleged breaches of two contracts involving the sale of real estate. We affirm in part and reverse in part.

On December 16, 1982, Fir, Inc. (Fir) offered to buy approximately 24 acres of land from Alchar and Knight, two chapter eleven debtors, for $1,995,000.00. In an "Order Confirming Sale of Real Property and/or Authorizing Trustee to Enter Into Executory Contract for the Sale of Land," the bankruptcy court authorized Tavormina, as the trustee of the debtors, to sell the property provided that Fir deposit $50,000.00 with Tavormina and that the transaction be closed no later than February 18, 1983.

Lawrence Lyman, an attorney retained by Fir, gave Tavormina a personal check for $50,000.00 which was dishonored by the bank for insufficient funds. On February 9, 1983, Fir assigned its interest in the sales contract to Elias Hakim. Hakim met with Arthur Weitzner, Tavormina's attorney, and both signed a "Stipulation for Modification of Order Confirming Sale of Property" ("stipulation") which modified the original sales agreement, in part by providing for a sixty-day extension of the February 18, 1983 deadline in exchange for a $50,000.00 deposit, half of which Hakim paid in advance.

Tavormina then filed a "Trustee's Motion to Modify Order Confirming Sale" in the bankruptcy court. Before the motion could be heard, however, Hakim advised Weitzner that he no longer wanted to buy the property and asked for the return of his $25,000.00 advance deposit. Tavormina responded by filing a "Motion to Declare Purchaser and Assignee in Default" in the bankruptcy court. After a hearing, the bankruptcy court issued an "Order Revocating Order Confirming Sale and Related Matters" which authorized Tavormina to resell the property to another party and expressly reserved the determination of the rights and liabilities of Tavormina, Fir, Lyman and Hakim for a separate trial.

Tavormina sued Fir, Lyman and Hakim in the bankruptcy court seeking to recover $50,000.00 from Fir and Lyman as well as a determination of rights as to Hakim's $25,000.00 deposit. ¹ Fir and Lyman filed a counterclaim against Tavormina and Weitzner seeking rescission of the sales agreement, damages for fraud and misrepresentation and a finding that Tavormina and Weitzner were in contempt of court. Hakim counterclaimed against Tavormina, asking for declaratory relief and damages for breach of contract and misrepresentation, and filed a cross-claim against Fir and Lyman for damages.

After the claim of Fir and Lyman against Weitzner was stricken, the case proceeded to trial in the bankruptcy court. Although the court found that a valid contract existed between Fir and Tavormina and that there was no basis for its rescission, it reasoned that Tavormina was not entitled to recover Fir's $50,000.00 deposit because it was funded with a bad check and, therefore, had not been "paid" within the meaning of the liquidated damages clause in the sales contract. In addition, the court construed the stipulation between Tavormina and Hakim to be subject to approval by the bankruptcy court. According to the court, because Hakim withdrew his offer to buy before court approval was obtained, the liquidated damages clause in the stipulation was unenforceable. The court dismissed all the claims with prejudice and ordered Tavormina to return Hakim's $25,000.00 deposit. 33 B.R. 230. The district court affirmed the bankruptcy court's judgment, holding that 1) Fir was not indebted under the sales contract because Lyman was not authorized to issue his check on its behalf 2) Lyman was not personally liable on the $50,000.00 bad check since it was "not tendered for the purpose of establishing consideration," and 3) Hakim was not bound by the stipulation because it was never approved by the bankruptcy court.

I. Liability of Fir

The bankruptcy court held that Lyman was authorized to present the $50,000.00 check on behalf of Fir, finding that there was no basis for rescinding the contract between Fir and the debtors and that the bad check was tendered by Lyman "on behalf of his client, Fir." Record, vol. 1 at 134-35. This finding must be upheld unless it is clearly erroneous. Matter of Multiponics, Inc., 622 F.2d 709, 713 (5th Cir.1980). ² The record reveals that Lyman was retained as Fir's attorney, was its president and owner and stood to gain a "commission" from the company if the transaction was completed. Based on these facts and a review of the entire record, we are not left with the requisite "definite and firm" conviction that the bankruptcy court's factual finding was incorrect. As a result, the district court erred in finding that Lyman was not authorized to tender the check to Tavormina.

Whether Tavormina is entitled to the $50,000.00 legitimately tendered by Lyman on behalf of Fir depends on the interpretation of the term "paid" in the liquidated damages provision of the real estate sales agreement. See Record, vol. 1 at 5. The general rule in Florida is that when "a real estate contract provides that if a sale is not closed because of the fault of the buyer [then] the deposit paid under the contract is to be retained by the seller, the seller cannot recover a deposit not actually made." Stewart v. Mehrlust, 409 So.2d 1085, 1086 (2d DCA Fla.1982); see also Campbell v. Salman, 384 So.2d 1331, 1332-33 (3d DCA Fla.1980). In Makris v. Williams, 426 So.2d 1186 (4th DCA Fla.1983), however, the court held that money is "paid" within the meaning of a liquidated damages clause in a real estate contract when the defaulting buyer represents to the seller that a deposit has been placed in an escrow account for the benefit of the seller notwithstanding the buyer's failure to actually follow through. See id. at 1188-89. In this case, Fir's tender of a check to Tavormina is a similar representation that the deposit funds are reserved for the seller's benefit. The fact that the defaulting buyer's representation in Makris was contained in the real estate contract itself whereas Fir's representation was in the form of a check does not appear to be material. See, e.g., Westminister Corp. v. Neptune Uranium Corp., 144 Colo. 281, 355 P.2d 1095, 1097-98 (1960) (dishonored check was a "payment made" within the meaning of a liquidated damages clause). Accordingly, we hold that the district court erroneously affirmed the bankruptcy court's determination that the $50,000.00 had not been "paid."

II. Liability of Lyman

The debtors next assert that Lyman is personally liable for the $50,000.00 as the drawer of the check. Generally, the drawer of a dishonored check is personally liable to the holder. See Fla.Stat. Secs. 673.413(2), 673.507(2). However, "[w]ant or failure of consideration is a defense as against any person not having the rights of a holder in due course." Id. Sec. 673.408; see also id. Sec. 673.306(3).

The bankruptcy court made no explicit finding of fact concerning whether Lyman received consideration for the check, reasoning only that the "trustee has no cause of action against Lyman, whose bad check was tendered on behalf of his client, Fir, and accepted as such." Record, vol. 1 at 135. However, it is apparent from the record and undisputed on appeal ³ that adequate consideration was tendered to...